chaza@Mars ~ $ pwd
/home/chaza
chaza@Mars ~ $ mkdir directory
chaza@Mars ~ $ mkdir linkies
chaza@Mars ~ $ ln -s directory /home/chaza/linkies/directory
chaza@Mars ~ $ ls -l /home/chaza/linkies/directory
lrwxrwxrwx 1 chaza portage 9 2006-09-30 16:51 /home/chaza/linkies/directory -> directory
chaza@Mars ~ $ cd /home/chaza/linkies/directory
-bash: cd: /home/chaza/linkies/directory: Too many levels of symbolic links
chaza@Mars ~ $ rm /home/chaza/linkies/directory
chaza@Mars ~ $ ln -s ./directory /home/chaza/linkies/directory
chaza@Mars ~ $ ls -l /home/chaza/linkies/directory
lrwxrwxrwx 1 chaza portage 11 2006-09-30 16:51 /home/chaza/linkies/directory -> ./directory
chaza@Mars ~ $ cd /home/chaza/linkies/directory
-bash: cd: /home/chaza/linkies/directory: Too many levels of symbolic links

This should be the same as:

chaza@Mars ~ $ ln -s `pwd`/directory /home/chaza/linkies/directory
chaza@Mars ~ $ ls -l /home/chaza/linkies/directory
lrwxrwxrwx 1 chaza portage 21 2006-09-30 16:52 /home/chaza/linkies/directory -> /home/chaza/directory
chaza@Mars ~ $ cd /home/chaza/linkies/directory
chaza@Mars ~/linkies/directory $